US & World Daily Markets Financial Briefing 17-01-2007

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Stock prices fall on inflation fears

NEW YORK - Wall Street retreated Wednesday, pausing from its record-breaking run as a higher-than-expected producer price index reignited interest rate worries in the market.
   
The Labor Department said the PPI, an indicator of inflation, rose by 0.9 percent in December -- slower than in November, but faster than the market expected. The report raised concerns that the Federal Reserve might have reason to resume its rate-hiking campaign to curb inflation.
   
In the first hour of trading, the Dow Jones industrial average fell 19.14, or 0.15 percent, to 12,563.45.
   
Broader stock indicators also fell. The Standard & Poor's 500 index was down 1.35, or 0.09 percent, at 1,430.55, and the Nasdaq composite index fell 6.04, or 0.24 percent, to 2,491.74.

Stocks in focus
   
Intel Corp. lost 4.4 percent in Frankfurt after reporting a 39 percent profit fall in the fourth quarter and forecasting basically flat gross margins next year.
   
Shares of computer makers Dell and Hewlett-Packard edged lower in overseas trade.
   
Server provider Rackable Systems is due for steep losses after forecasting worse-than-forecast adjusted earnings for the fourth quarter.
   
The news wasn't all bad in the chip sector, however. Holland's ASML Holding, which makes machines for chip makers - including Intel - reported a stronger-than-forecast fourth-quarter profit and sounded an optimistic tone for 2007.
   
Banks J.P. Morgan Chase and Mellon Financial topped analyst estimates for fourth quarter profit.
   
Lennar, the home builder, said 2007 deliveries may fall more than 20 percent, though it expects to meet or exceed 2006 earnings per share.
   
Apple Inc. reports its quarterly results after the market close.    

Procter & Gamble rose 1 percent in Frankfurt after the household products maker was upgraded to buy at Goldman Sachs.
   
Elsewhere, Sony Ericsson, the mobile phone making venture from Sony and Ericsson, reported a stronger-than-forecast profit after taking market share from Motorola and Samsung.
   
SABMiller, the beer producer that's about a third owned by Altria Group, reported better-than-expected 10 percent beer volume growth in the last quarter, and said it managed to curb a slowdown in U.S. sales.

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Dollar fails to rise after US data; central banks seen buying euros

LONDON - The dollar could only record the most fleeting of gains against the euro after a set of strong US data, including a bigger than expected rise in producer prices. Reports that foreign central banks were in the market buying euros kept the dollar from gaining ground.
   
On the whole, currency market reaction was muted. The PPI data pushed the dollar slightly higher, the industrial output numbers had a neutral effect, and the portfolio flows data was seen as reasonably strong.
   
Jamie Coleman at Thomson IFR Markets believes the euro will be stuck in the 1.2900-1.2940 usd range. "Central bank activity has been rumoured on both sides of the market this morning (in the US), suggesting options-expiries may be playing a role," he said.
   
Elsewhere, the pound reached a 31-month high against the euro and nearly 1.97 usd despite faltering slightly earlier in the day.
   
The pound had edged lower after data released this morning showed UK wage inflation remained subdued during November, but falls were limited as the currency continued to benefit from yesterday's very strong UK inflation data.
   
The figures showed headline average earnings, excluding bonuses, in the November quarter were 3.7 pct higher over the previous year, unchanged on the downwardly-revised October rate, but below market expectations for a modest rise to 3.9 pct.
   
The yen remained in focus as the market continued to fix its attention on whether the Bank of Japan (BoJ) will raise interest rates tomorrow.
   
It remains a tight call for the market, but analysts noted a number of reports overnight have suggested that the BoJ will hold fire this month.

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The European markets at 13.15 GMT

London -  UK blue chips remained under pressure in midmorning trade, falling back from opening gains, with DSG International the main casualty on margin worries following its interim results and Christmas trading update and Rio Tinto sliding on weak output figures.
   
At 11.45 am, the FTSE 100 index lost 5.7 points at 6,210.0, falling back from earlier gains, while the broader indices were all mixed. Volume was average, with 1.022 bln shares changing hands in 161,980 deals.

Frankfurt - German shares were slightly higher in midday Frankfurt trading, building on opening gains, with TUI and Bayer leading the way.  At 1.15 pm, the DAX 30 index was up 9.04 points or 0.13 pct at 6,725.86, having moved between a low of 6,712.10 and a high of 6,732.31 in today's session so far. The MDAX gained 3.26 points or 0.03 pct to 9,571.78, while the TecDAX lost 0.34 points or 0.04 pct to 790.14. The DAX futures contract was 2.50 points or 0.04 pct lower at 6,765.50.

Paris - Share prices were flat at midday, after recouping early losses sparked by negative news on a number of stocks. At 12.15 pm the CAC-40 index was unchanged at 5,591.46.

Milan - Share prices were slightly lower at midday, led by Fastweb as the speculative interest in the company unwinds, while Alitalia was higher amid heightened speculative interest. At 1.00 pm, the Mibtel index was down 0.09 pct at 32,319 and the S&P/Mib fell 0.16 pct at 42,046, while volumes stood at around 1.88 bln eur.
   
Madrid - Share prices were higher in quiet midday trade, with the banking sector in focus after a slew of positive broker notes amid the full-year earnings season, while Telefonica was on offer. At 12.40 pm, the IBEX-35 index put on 30.4 points to 14,386.5, after trading in a range of 14,352-14,408, on turnover of 1.6 bln eur.

Amsterdam - Shares in Amsterdam were almost unchanged from yesterday's close at midday, with financials pulling the AEX down while ASML soared following strong fourth quarter earnings and pushing the AEX up. At 12.23 pm, the AEX was up 0.09 pct or 0.44 points at 505.23, after opening at 505.88 and trading in a range of 503.65-506.05.

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Asian shares close mixed, Tokyo cautious ahead of rate decision

HONG KONG - Asian shares closed mixed, with the Tokyo market cautious ahead of the Bank of Japan's rate decision tomorrow.
   
Tokyo shares closed higher, coming off the morning's lows as investors emerged to buy on dips, with futures-led buying also providing support, dealers said. But they added that investors were largely playing it safe, with many taking a cautious stance ahead of the Bank of Japan's rate decision tomorrow at the end of its two-day policy meeting.
   
The blue-chip Nikkei 225 Stock Average closed up 58.89 points or 0.34 pct at 17,261.35, off a high of 17,335.03.
   
The TOPIX index of all issues listed on the Tokyo Stock Exchange's first section ended the session up 3.22 points or 0.19 pct at 1,706.76, off a high of 1,711.47.
   
SBI Securities strategist Hideyuki Suzuki said the market bounced back from its losses in the morning as investors bought on dips, with sentiment helped in part by brisk trading in futures.
   
Australian shares closed lower as investors sold resource and energy stocks after base metal prices remained mixed in London trading overnight while oil prices slipped further to 19-month lows.
   
Negative sentiment towards banking stocks added to the selling after Fitch Ratings forecast moderate growth in the sector for 2007 due to tougher competition and slower growth in housing finance.
   
The S&P/ASX 200 fell 27.3 points or 0.48 pct to close at 5,646.1, widening the gap to Monday's record close of 5,673.8. The key index closed above the day's low of 5,645.2 and below the high for the day at 5,670.3.
   
Hong Kong shares were higher in afternoon trade, with property stocks and select China financials gaining ground.
   
Oil stocks came under pressure after crude prices fell near to 51 usd a barrel on news that Saudi Arabia has said that there may be no need for further production cuts. At 3.10 pm the Hang Seng Index was up 24.40 points or 0.12 pct at 20,052.35.
   
In mainland China, A-shares in Shanghai and Shenzhen gave up early gains and closed lower on profit-taking with real estate developers and financial issues losing ground.
   
The Shanghai A-share Index tumbled 43.78 points or 1.48 pct to 2,920.08 and the Shenzhen A-share Index was down 9.39 points or 1.39 pct at 664.66.
   
Seoul shares closed lower on heavy program selling, with stocks hit by Intel's sharp fall after announcing its quarterly result and uncertainty over the Bank of Japan's rate decision tomorrow.
   
The market dropped more than one pct and fell through the 1,370 point level in early trade before ending the day with a partial recovery on bargain-hunting by retail and foreign investors.
   
The KOSPI index closed down 10.23 points or 0.74 pct at 1,379.48, off a low of 1,369.08 and a high of 1,391.75.

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Brent crude oil at 50.75 usd per barrel, lowest price since May 31 2005

Brent crude oil fell to 50.75 usd per barrel, its lowest level since May 31, 2005, hit by Saudi Arabia's refusal to take emergency steps to halt the decline in the price of oil.

Crude oil on the New York Mercantile Exchange fell 12 cents to $51.09 a barrel, testing prices not seen since May 2005.

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